International companies choose France because of its strategic position at the heart of Europe, the largest market in the world with 500 million consumers, and because of its membership in the euro zone, which offers the advantages of a single currency in 13 different countries. But most of all, because it is open to innovation.

High Productivity, Skilled Workers Attract Foreign Investors

Name a country with a productive, highly skilled work force. Germany, you say? Sweden? Singapore?

You can do better: France.

“People in France are very well-qualified,” says Clara Gaymard, vice-president of government strategy and sales for General Electric International and President and CEO of GE France, in Paris. This U.S. company has had a presence in France for over 40 years, where it employs 10,000 people.

According to the International Labour Organization (ILO), France is ranked just after the U.S. and Norway for hourly labor productivity, calculated by dividing gross domestic product by the number of hours worked. This calculation works to France’s disadvantage though, as Norway’s GDP is inflated by oil revenue, which isn’t entirely the fruit of a person’s labor.

Germany and Sweden, which are both well below France for hourly productivity, along with Singapore, which is lower still, don’t even bear comparison, while productivity in Europe’s “cheap” destination, Romania, is a full 80% lower.

On total productivity, or GDP per worker for 2008, France beats Norway and trounces Germany, according to the ILO. And productivity is continuing to rise in France, up in 2008 year-on-year, compared with no change in Germany and a drop in Sweden, according to the Organisation for Economic Co-operation and Development.

While productivity is essential, sophistication and the quality of work performed are also key considerations for investors. GE chose France as the site for three global centers of excellence — in health care, energy and oil & gas — where it develops new technologies.

Although the French are “well-qualified generally,” receiving “a great deal of education in their jobs,” Ms. Gaymard finds particular strengths in finance and engineering. “France is a country of engineers. You don’t have a problem, like in the U.K., in finding the right engineers.”

In fact, the World Economic Forum’s Global Competitiveness Report for 2009-2010 ranks France near the top of its list for availability of scientists and engineers, substantially higher than Germany which is around a quarter of the way down.

Yet high qualifications don’t come at a high price. French total labor costs are in line with the rest of Europe, Ms. Gaymard says.

Hourly labor costs in France for 2008 were substantially lower than in Germany or U.S., though slightly above those in the U.S., according to the ILO. These costs include not only salaries but also mandatory and contractual contributions for items like health-care coverage, which is universal in Europe, but which fewer and fewer companies provide in the U.S.

These cost calculations were in France’s favor when Toray Industries Inc. looked to add a business line in Europe. This Tokyo maker of plastics, chemicals, fibers, textiles and other products announced in February 2008 that it was expanding in France with a new €70 million plant in Saint Maurice de Beynost, near Bordeaux, to produce high-performance polypropylene plastic film for food packaging.

Toray decided to locate the new facility next to one of the company’s existing plants near Bordeaux, which makes a different kind of polyester film, says Yoshitaka Yamagata, a Toray spokesman in Tokyo. “We have well-qualified workers in this company. When we think about a new investment, it’s better to make a new base next to the existing company site rather than finding another country.”

First Solar Inc. of Tempe, Arizona, one of the biggest makers of thin-film solar panels, also chose a site near Bordeaux, in Blanquefort, for its fourth plant, construction of which is due to start in the second half of this year, following an investment of about €100 million. “With good infrastructure and a solid work force, we have found a location that supports our unique, high-tech operation,” says Bruce Sohn, President, First Solar.

Emphasis on Higher Education

“Our aim is very simple. We want the best universities in the world,” said French President Nicolas Sarkozy as he announced last December how funds raised by the “national loan” – a €35 billion state bond issue – would be distributed, with the largest chunk, €11 billion, allocated to universities.

The government has also earmarked €1 billion to create a huge campus in Saclay, on the outskirts of Paris, grouping institutions currently scattered around the city. And €8 billion will go toward funding research.

Education in general is a high priority in France, with some 6% of the country’s GDP allocated to cover education expenses, putting it in the top-five investors in education worldwide. In 2008, the country allocated €24.9 billion to higher education, 1.27% of GDP. Forty-one percent of 25-34 year olds in France are university graduates, a much higher proportion than in Germany or Italy.

France also boasts some of the best business schools in Europe, according to the 2009 rankings by the U.K.’s Financial Times. Hautes Etudes Commerciales, or HEC, is ranked No. 1, Insead is No. 3, EM Lyon Business School is No. 8, Essec Business school is No. 11, ESCP Europe is No. 12 and the Grenoble Graduate School of Business is No.19.

Perhaps the most famous educational institutions in France are its grandes écoles, which produce many of the country’s “movers and shakers.” While state universities accept all students from their regions — provided that they pass the very rigorous baccalauréat exam — the grandes écoles require a further entrance exam, accepting only the crème de la crème of each grade.

High school students who aren’t college-bound receive technical training and on-the-job experience undertaken alongside their studies.